How the Holidays can affect your Credit Score

Tis the season…to be spending.

Yes, with the holidays fast approaching, chances are you’ve made your list (and checked it twice). But when it comes to holiday spending, you want to be sure that your credit score doesn’t get naughty, but stays nice. With all the spending you’re likely to do, combined with the increased threat of scammers this time of year, keeping your credit in good shape can be easier said than done. That’s why we’ve put together this handy list of tips and suggestions for how to prep for the holidays, while keeping your credit score in good shape. Here’s a look:

Tips and Suggestions for Holiday Spending (While Protecting Your Credit Score)

Use credit cards, not debit cards, to minimize impact of fraud: Any type of fraudulent purchase made on your credit or debit cards isn’t good, but those made on debit cards have the tendency to be a lot more impactful than those made on credit cards. That’s because the money spent can take more time for you to get back – and scammers are spending money that you already have in your account, not money that you’re promising to pay back later, as is the case with a credit card.
Be careful about where you shop: Another important tip to safeguard against scammers – be careful where you’re shopping, especially when it comes to online shopping! We get that things can get expensive around the holidays and you’re looking to save where you can, but be cautious about where you’re providing your credit card information. Look for the padlock symbol to verify site security, and if a deal seems too good to be true, know that it’s likely because it is too good to be true.
Watch your credit utilization ratio: We strongly suggest that you only charge purchases you know you can pay off before the end of the year, but regardless of your situation, it’s important to watch your credit utilization ratio, which is your debt versus your total credit allotment. Ideally, you want to keep this ratio at 30 percent or less for it not to lower your credit score. For example, if your credit limit on a card is $10,000, you want your spending to be $3,000 or less.
Refrain from opening new lines of credit: New credit cards don’t just have the potential to impact your credit utilization ratio, but every time you apply for one, your credit information is pulled, which also lowers your score.
Make on time payments: This accounts for 35 percent of your FICO score, so it’s incredibly important to make on time payments with any and all bills. Failure to do so will almost certainly lead to a significant drop in your credit score. In a perfect world, you should try carrying a zero balance on your credit cards and only charge what you know you can pay off each month. That’s not realistic for everyone, but regardless of the situation, making on time payments should always be a priority.

Credit Card Tactics – Avoid these on Black Friday

Gearing up for the start of the holiday season, stores are preparing for the onslaught of the Black Friday shopping masses. One of the Credit Card Tactics taken by retailers is the promotion of store credit cards. Discounts on purchases made when opening a new line of credit and zero interest financing — these are just a few of the favored ways stores lure shoppers into opening up retailer credit cards.

Shoppers who fall for these tactics end up in a jam by the start of the new year. Not only do retailer credit cards lead to lower overall credit scores, as a consumer’s credit score automatically drops by five points with each new store credit card, but there are long-term consequences. Store credit cards typically come with a massive interest rate beyond the attractive zero interest-rate financing promised at the outset. Over time, the amount of interest paid on these cards, ranging from 18 to 30 percent, eats away at any initial savings made from those discounts for opening a new store card.

Consumer spending for the holiday season is set to increase by approximately 5 percent, according to the National Retail Federation, for an estimated $804 spent per consumer. As a result, credit card deals are bound to attract more shoppers this year.

Those in the know, including the credit card comparison company CardHub, are already on the alert. They note that those retailers who market deferred interest rate plans to new cardholders are playing naughty. For instance, if a consumer misses one credit card payment or takes longer than the set period to pay off a debt, he or she will face financing expenses 27 times greater than the originally stated interest rate.

The Consumer Financial Protection Bureau is also on high alert this season. It has sent out warnings to retailers who plan to promise a promotional annual percentage rate or set transactions over a set time frame, as these are unsavory credit card tactics.

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Nikitas Tsoukalis, President

Key Credit Repair

Credit Before Holiday Travel – 10 Things to Do Before

Getting ready to hit the friendly skies and take in some holiday travel? There are a few credit-related chores to take care of between picking your hotel and packing your bags. Before you even book your tickets, start taking care of these credit card tasks:

1. Let your bank know you are traveling.

Whether you are traveling overseas or just to another state, give your bank and credit card issuers a quick call with your itinerary. Card issuers may freeze your accounts to protect against fraud if the activity is considered unusual. Making a call before you go can save you the headache of dealing with potential issues while on the road. Many credit card companies also allow you to register travel plans online.

2. Check out your card’s concierge service.

You don’t need to be wealthy or famous to have a concierge at your service. Many credit cards offer free concierge service, which can assist with everything from researching local attractions to finding the best price on hotels. Check your card benefits to see if this is available.

3. Look up your card’s foreign transaction fees.

Many cards charge a per-transaction fee or a percentage when you use your card in another country. Make a note of which card charges the lowest fees, and try to use it exclusively to save while you are away.

4. Check out which of your cards give rewards for travel.

Discover offers 5 percent back on travel during one quarter of the year. Some American Express cards offer 2 percent to 3 percent back on travel expenses at any time. And, other cards pay out rewards in the form of airplane miles, which can be used for expenses during your trip.

5. Research your card’s protections for travel problems.

Depending on your cardholder agreement, you may have protections during travel. American Express, for instance, provides insurance when you use their card to rent a car. Knowing the coverage on your cards can keep you from expensively reproducing coverage through rental car and travel insurance.

6. See if your card offers travel discounts.

Many cards have agreements with airlines, hotel chains and rental car companies to give discounts to customers. Often, these can be found inside the members area of your credit card site.

7. Set a daily spending budget for your trip.

It’s easy to get carried away with extravagant meals and fun souvenirs. To keep spending under control, set up daily charge limits, and have reminders automatically sent to your phone when you get close to these limits.

8. Double-check your cards’ spending limits.

Having a card declined is embarrassing. And, over-the-limit fees can put a bite on your finances. Before you go, take note of how much you currently owe on each card to avoid going over the limit. Be mindful of charges that can add up, such as hotel fees.

9. Decide which cards to carry when.

It’s best not to have all of your cards in one place while you are traveling. Keep some securely in your luggage or hotel safe while you carry just one or two.

10. Make a copy of all your cards.

Before you leave, photocopy or take digital photos of all of your cards, front and back. (If you take photos with your phone, be sure to store the pictures in an encrypted folder and that automatic back-ups are turned off.) By having copies of all the cards, you can quickly contact your card issuers if your wallet is lost or stolen during your trip.

By taking a few minutes to complete these tasks before you go, you can save money, eliminate stress and better enjoy your time on the road.

Key Credit Repair wishes you safe and enjoyable holiday travel and a prosperous New Year!